Brexit: Could “Singapore-On-Thames” Become Reality?

Merry Phillips


In arguments for Brexit, one idea dominates: freedom. Freedom to choose our own laws and define our economy. One vision for the UK’s future outside Europe is“Singapore-on-Thames”. The idea is that the UK can copy low-tax, low-regulation economies like Singapore and so achieve their prosperity [1].

This article argues that this model is unworkable. Firstly, the EU will do everything in its power to prevent “unfair” tax competition on its borders. Despite the fantasy of freedom, the EU will still have considerable power over the UK after Brexit. Secondly, practical reality limits the UK’s choices. Even if the EU were not hostile, the UK economy is just too big for Singapore-on-Thames.


One of the UK’s main attractions for foreign business has been its access to the EU single market. This allows a company based in the UK to trade freely with any other EU country. Of course, the lack of customs duties and other financial and administrative savings are also good for homegrown business. There has been much debate about how the UK can compensate for these losses after Brexit. The UK must convince existing businesses to stay in the UK, and new businesses to move here, in order to bring tax revenue and jobs.

On 24 September, Prime Minister Boris Johnson pledged to cut regulations and corporate tax to attract foreign business after Brexit [2]. Johnson claimed that the UK would have “the most competitive tax rates…in the hemisphere” and would “take advantage of all the freedoms that Brexit can give”. This model for the UK’s future has often been called “Singapore-on-Thames”.

Singapore’s corporate tax rate is 17%. At first glance, this hardly differs from the UK. The UK’s corporate tax rate is 19%, but will drop to 17%in 2020. However, the UK lacks the incentives that allow companies in Singapore to pay nearly no tax.

Aside from a general tax exemption worth thousands of dollars [3], Singapore also tempts selected multinationals with special “sweetheart deals”. Google,Apple, Microsoft, BHP Billiton and Rio Tinto were all under audit by theAustralian Tax Office in 2015 for their use of Singapore "marketing"and "service" hubs. In 2015the global miner BHP Billiton paid an effective rate of just 0.002% on the billions of dollars in sales of Australian resources it directed through itsSingapore marketing hub [4].

The UK cannot offer such deals to tempt foreign investors whilst it is in the EU, due toEU law on “state aid”. State aid is defined by Article 107 of the Treaty on the Functioning of the European Union.Subject to certain exceptions, “any aid granted by a Member State… which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market”. In August 2016, the European Commission stated that Apple had benefitted from illegal state aid due to Irish tax rulings which artificially reduced its tax burden; it ordered the company to pay €13bn in back taxes to Ireland [5].

After Brexit, could the UK become the Singapore of the West? This does not seem likely, for two reasons. The first reason is EU hostility; the second reason is population size.


EU countries fear an aggressively competitive neighbour luring businesses, jobs and investment away.Multinationals shifting profits from higher-tax nations is a particular issue. The threat has been repeatedly voiced by German chancellor Angela Merkel. “With the departure of Great Britain, a potential competitor will of course emerge for us,” she said. “That is to say, in addition to China and the United States ofAmerica, there will be Great Britain as well.” [6]

The EU is serious about preventing harmful tax competition on its borders. Johnson’s new Brexit deal already recognises this reality. The Political Declaration accompanying the WithdrawalAgreement states that any new trade deal between the UK and EU would be "underpinned by provisions ensuring a level playing field for open and fair competition" [7]. This means that "the Parties should uphold the common high standards applicable in the Union and the United Kingdom at the end of the transition period in state aid, competition… and relevant tax matters” [8]. These measures are intended to ensure that UK businesses cannot undercut EU industry.

The “level playing field” commitment has been downgraded, from part of the binding Agreement in Theresa May’s deal, to the non-binding PoliticalDeclaration in Johnson’s deal. However, the EU has made it plain that when it comes to the eventual trade agreement, this will be high on the EU’s agenda.

Article 184 of the Withdrawal Agreement [9] requires the parties to “use their best endeavours,in good faith” to deliver the intentions of the Political Declaration. This is meant to leave the UK more flexibility to determine its future, as demanded by hardline Brexiteers. However, one sentence in the Political Declaration is telling: “The precise nature of commitments should be commensurate with the scope and depth of the future relationship and the economic connectedness of theParties.” [10]  The EU’s guidelines for a future trade deal also make an “ambitious and wide-ranging trade agreement”dependent on “sufficient guarantees for a level playing field”[11]. The EU’s position is clear: if the UK wants a good trade deal, it has little room to deviate from EU requirements. The minimum the EU will permit is likely to be a “non-regression clause”, which would bind both sides not to move back from current levels of protection on tax, competition and state aid.[12]

Why is the EU taking such a strong position? The EU’s guidelines say it is necessary due to the UK’s "geographic proximity and economic interdependence” [13]. Yet the EU has tolerated competitive tax policies from many countries within and near its borders. For example, the EU has close relations with Switzerland, even though Switzerland was on its “watchlist” for tax havens until October 2019 [14]. Within the EU, Ireland has been named the world’s biggest tax haven [15].

The answer is that the EU is changing. In recent years, the EU has taken a much stronger approach to “unfair”tax competition. To take Switzerland as an example, the EU forced Switzerland to abolish certain tax regimes in May 2019. After years of having its demands ignored, in December 2012, the bloc threatened Switzerland with trade tariffs that would have obstructed Swiss business from Europe, its main trade partner [16]. Ireland has also faced pressure regarding an EU-minimum tax rate [17] and it seems only a matter of time before it is compelled to reform. Other countries already forced to make changes include the Netherlands [18], Andorra [19] and Liechtenstein [20]. In this context, it would be remarkable if the EU did not take advantage of theUK’s need for a trade deal to prevent the development of what it sees as harmful tax practices. This is particularly the case given the UK’s large economy and thus the threat it poses.

The UK must think carefully before antagonising its largest trading partner. In 2018, the EU accounted for 46% of UK exports and 54% of UK imports. The US, the UK’s second most important trading partner,accounted for just under a fifth of UK exports and just over 10% of exports [21].Despite fantasies about closer ties with the US, India and other oldCommonwealth markets, their distance from the UK is a significant disadvantage.In addition,  the reality is that such countries will be more interested in a UK that retains links with Europe. A 2017 report suggests that American investment in the UK,worth £487bn in 2015, is largely based on access to the single market [22].


The UK faces another serious obstacle toSingapore-on-Thames: population.

Tax havens are generally low-population countries with access to bigger markets [23]. Singapore is a prime example: population 5.6 million and a good location for companies wanting to expand into emerging Asian economies. Ireland (4.83 million population) and Switzerland (8.56 million) are also dwarfed by the UK’s 66.44million. In countries like this, lowering tax rates increases revenue because the profits concerned are almost all earned outside the jurisdiction. In a country like the UK, multinationals earn significant profits at home, and so cutting tax rates means losing out on revenue.

Low population also matters for tax havens because the revenue and new jobs brought by a low-tax model impact small economies in away impossible for large economies [24].  For example, imagine Ireland’s tax policy attracts 10 multinationals, and each brings 3,000 jobs. The creation of 30,000 jobs which would not otherwise have existed benefits Ireland’s small economy in a way it would not benefit the relatively large UK’s.

This is not to say that the UK tax regime could not be made more attractive to investors without ruining the economy. For example, the UK might make use of sweetheart tax deals to tempt selected multinationals (an option the EU seeks to exclude by the level playing field commitment on state aid). Even discounting the EU though, Singapore-on-Thames goes too far.


After Brexit, the UK may make itself more attractive to investors by slightly cutting corporate tax and other tweaks. However, it is argued that an ultra-low-tax Singapore-on-Thames is a fantasy. Apart from the problem of the UK’s large population, it would be perverse to antagonise the EU. The EU is the UK’s largest trading partner, and the UK cannot realistically look toAmerica or Australia to bridge the gap if it damages the EU relationship. AsEdinburgh Tax lecturer Dr Cerioni remarks, “the inability for UK-based businesses to enjoy competitive advantages versusEU-based businesses may perhaps ultimately become one of the factors which pushes the UK to reconsider Brexit itself” [25]. “Freedom” from EU control is apolitical idea that does not survive real-world economic analysis.


[1] It may be possible that this scheme will only apply to Great Britain if Johnson’s Brexit deal passes. Northern Ireland would remain aligned to some EU rules in order to avoid a hard border.

[2] Peter Walker and Daniel Boffey “Johnson hints at major reforms to tax and industry post-Brexit” (The Guardian, 23September 2019) <

[3] Singapore offers a general tax exemption of 75% on the first S$10,000 (approx. £5,692) of chargeable income and 50% on the next S$190,000. Qualifying start-ups benefit from an even higher exemption of 75% on the firstS$100,000 and 50% on the next S$100,000.

[4] HeathAston “BHP Billiton reveals minusculeSingapore tax bill as ATO chases it for $500m” (The Sydney Morning Herald, 27April 2015) <

[5] European Commission Press Release, “State aid: Ireland gave illegal tax benefits to Apple worth up to €13 billion” (20 August 2016) <

[6] Tom Peck “Angela Merkel is right. The UK is now the EU’s ‘competitor.’It is not a fight the UK can hope to win” (The Independent, 15 October 2019)<

[7] Political declaration setting out the framework for the future relationship between theEuropean Union and the United Kingdom, para 17

[8] Ibid, para 77

[9] Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, as endorsed by leaders at a special meeting of the European Council on 25 November 2018. [Note: it seems nothing has changed from May’s Withdrawal Agreement other than the newNorthern Ireland Protocol.]

[10] Political declaration, para 77

[11] EC (Art. 50) guidelines on the framework for the future EU-UK relationship, 23 March 2018, para 8

[12] Institute for Government “Brexit negotiations - what is the 'level playing field'?” (22 October 2018) <

[13] Ibid, para 12


[15] Simone Rensch, “Ireland named as ‘world’s biggest tax haven” (Public FinanceInternational, 15 June 2018) <

[16] PascalHinny and Jean-Blaise Eckert “Corporate tax: Is Swiss corporate tax system still attractive despite EU pressure?” (International Tax Review, 12 March2013) <

[17] Dara Doyle “Irish May Face EU Tax Pressure in Return for Brexit Support” (Bloomberg,17 September 2018) <

[18] Isabel Gottlieb “Dutch Closing Door on Popular Corporate TaxBreaks (Corrected)” (Bloomberg Tax, 18 September 2019) <

[19] Marc De Diego Ferrer, “Is Andorra a Tax Haven?”<

[20] EY Global Tax Alert (29 November 2018)<

[21] Office for National Statistics “Who does the UK trade with?” (3 January 2018)<

[22] Daniel Boffey “US businesses warn the UK over loss of access to EU single market” (The Guardian,8 March 2017) <

[23] Anthony Van Fossen,“Small Economies and Global Economics” - Chapter 16, “Why Are Tax Havens inSmall States?”, pp. 221-231, copyright 2008, van Fossen

[24] Ibid

[25] Dr Luca Cerioni “Brexit and Direct Taxation: A Turning Point for EU Tax Law?” (European Futures, 20 December 2017) <

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